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Pairing donations and discounts can backfire

LiveMint logoLiveMint 30-04-2017 Rose Jacobs

Most of us have seen marketing pitches that combine sales offers with charitable donations. Buy a product or a service, the pitch goes, and the vendor will give a proportion of its revenues to charity.

But one reason we give to charity is because it makes us feel good about ourselves, and if that feeling is compromised by coupling it with a retail pitch, we might abandon the do-gooding altogether, suggests research by Chicago Booth’s Jean-Pierre Dubé, Temple University’s Xueming Luo and Sichuan University’s Zheng Fang.

The researchers offered residents of a large Chinese city the opportunity to buy vouchers for movie tickets at a local theatre. Some of the offers, which came in the form of mobile text messages, included discounts on the ticket purchase price. Other offers said that a voucher purchase would lead to a charitable donation. And the final category of offers combined discounts and donations in varying amounts.

The researchers expected the participants to behave in an economically rational manner: people would be more likely to buy vouchers as the cost of movie tickets fell or the level of donations rose.

But the responses indicate the relationship between altruism and economics is not straightforward.

People eagerly bought vouchers that paired small discounts with donations of any size. But they were less likely to buy vouchers that combined big discounts with donations. This was the case even—and especially—if the purchase would have triggered a relatively big donation to charity.

Researchers have for decades discussed the possibility that financial incentives might discourage people from donating, whether it’s money, time, clothing, or blood. But evidence that links incentives to reduced donations is scattershot, and even studies arguing that the effect exists do not agree on the cause.

Dubé, Luo and Fang reject several possible explanations for what they observed. They don’t think people wanted their do-gooding to appear pure, as the donations were made in private, on phones. They don’t think financial incentives destroyed a person’s internal drive to do good, as only the big discounts—not the small ones—produced a counter-intuitive response. Finally, they dismiss the concern that people might be interpreting steep discount-donation combinations as a sign they’re being sold a subpar product, because people bought deeply discounted tickets that weren’t linked to donations.

The researchers argue instead that we give to charity because doing so feeds our positive self-image. Big discounts diminish that, so we decline the offer, regardless of how good the cause.

That has implications for, among others, “cause marketing”, when vendors couple their sales with a pledge to give to charity, which is associated with more than $2 billion of US charitable giving annually. Research indicates marketers may want to tread carefully, as people value their self-esteem more than a good cause.

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